Digital Transformation of Supply Chain Processes

Digital Transformation of Supply Chain Processes

by Albert Wee Kwan Tan, PhD, Associate Professor and Academic Program Director, Online Master in Business Administration, Asian Institute of Management

In the dynamic landscape of modern business, the integration of cutting-edge technologies has substantially enhanced internal operations. E-commerce has fostered seamless communication between businesses and suppliers, and various supply chain systems have expedited the journey of products to market with unprecedented efficiency. However, this ongoing evolution is not static. The current era marks the inception of a transformative business paradigm with the advent of supply chain digitalisation. Real-time connectivity, heightened visibility, immediate responsiveness, and anticipatory capabilities are poised to redefine the fundamental characteristics of enterprises.

This transformative shift demands a deliberate and strategic approach, requiring businesses to build upon past incremental advancements while steering towards a future characterised by networked, digitally connected ecosystems. Every company’s journey is unique and intricate, making the pursuit of a digitally transformed supply chain a challenging but rewarding endeavour. The imperative lies not only in reaching a specific end goal but in embracing the myriad benefits accrued throughout this transformative journey. This article consolidates fresh insights into steering digital supply chain transformation projects and effectively managing the associated internal and external changes, offering a guide for a future where innovation and efficiency harmoniously converge.

For organizations contemplating a digital transformation in their supply chain, we advocate commencing with a comprehensive assessment of existing processes. This includes identifying the necessary skill sets for key roles critical to driving such initiatives. The envisioned outcome is a roadmap for future investments based on meticulous research, designed to enhance operational efficiency and the digital supply chain experience for individual functions and stakeholders across various business domains. This article summarizes some leading practices already adopted by forward-thinking companies embarking on digital supply chain transformations.

Five Key Steps to Digitalize the Supply Chain Process:

1. Establishing the Core Team: Identify and announce the business owner of the supply chain transformation program. The business owner nominates the program manager and a supply chain process subject matter expert (SME) to initiate preparation activities.

2. Setting Mutual Goals: Establish organisational and supply chain partner targets. Identify program participants and outline roles and responsibilities for all stakeholders. Develop a robust program governance structure. Emphasise the fundamental goal of an integrated supply chain to improve operating efficiency or cost management compared to competitors. Conduct cross-functional and cross-partner workshops to address the central question: How will this process enhance supply chain performance?

Figure 1

3. Identifying and Assessing Stakeholders: In the pursuit of a successful digital supply chain transformation, employing the Business Model Canvas, crafted by Alexander Osterwalder, becomes a pivotal tool. This offers a structured approach to comprehending a business model, extracting valuable insights into customer segments, value propositions, channels, and revenue streams. In the context of our transformational journey, the canvas serves as a means to identify and assess stakeholders who wield the potential to influence the program significantly. Figures 2 and 3 provide a snapshot of a sample Business Model Canvas, illustrating the state before and after transformation.

Before Transformation (Figure 2): This captures the existing state of the business model, mapping out customer segments, key value propositions, channels, customer relationships, revenue streams, key resources, key activities, key partnerships and cost structure. Stakeholders are identified and assessed within this pre-transformation context, considering their current impact on the supply chain

Figure 2

Figure 3

After Transformation (Figure 3): The canvas is updated to reflect the envisioned changes post-transformation. Adjustments are made to customer segments, value propositions, channels, customer relationships, revenue streams, key resources, key activities, key partnerships, and cost structure to align with the transformed supply chain model. Stakeholders are reevaluated to understand their potential influence and impact in the transformed landscape.

The extension of the Business Model Canvas serves as a pivotal phase in the strategic planning of the digital supply chain transformation program. This comprehensive step involves articulating the programmes scope, defining its objectives, and establishing a timeline for implementation. Importantly, this process integrates a thorough analysis of the strengths and weaknesses inherent in the company’s existing supply chain framework. By factoring in these internal dynamics, the program’s parameters are refined, ensuring a tailored and nuanced approach to the transformation journey. . It goes beyond a mere technological upgrade, considering the intricate interplay of stakeholder dynamics and the unique attributes of the company’s supply chain ecosystem and that the transformation seamlessly integrates with the overall business model. The result is a well-crafted roadmap that not only addresses the specific needs and challenges of the business but also optimally leverages key processes and technologies. This approach lays the foundation for sustained success by fostering a resilient and adaptive supply chain that resonates with the broader goals of the organisation.

4. Coordination and Planning Across Supply Chain Partners: Establishing and maintaining relationships is fundamental for fostering long-term trust and support. The planning process is bifurcated into two crucial levels: buyer-supplier coordination and production-distribution coordination.

Level 1: Buyer-Supplier Coordination: At this stage, the primary objective is to secure a stable supply of raw materials and resources essential for the project’s success. This entails building collaborative and dependable relationships with suppliers[AWKT1] , emphasising consistency, quality, and reliability in the supply chain.

Level 2: Product-Distribution Coordination: Moving beyond the procurement phase, the focus shifts to coordinating the distribution of products, ensuring a seamless transition from development to customer delivery. This level requires a meticulous examination of how the firm can optimally structure its supply chain to facilitate the efficient flow of costs and resources.

To facilitate these coordination efforts, the core team must initiate a series of programme kick-off meetings. These sessions serve a dual purpose: first, to engage stakeholders across the spectrum, aligning expectations and garnering support within the organization and among participating supply chain partners. Second, it provides a platform to create and disseminate the overall program plan comprehensively. During these meetings, the team outlines the responsibilities of key individuals, ensuring everyone is cognizant of their roles and contributions. Furthermore, the milestones to be achieved are articulated, delineating tasks over a feasible timeline. This strategic and communicative approach not only establishes a unified understanding of the programme but also fosters a collaborative spirit among stakeholders, setting the stage for a well-coordinated and successful digital supply chain transformation.

5. Establishing Governance Structure: Ensuring maximum performance and efficiency within the supply chain is a critical aspect of digital supply chain transformation. The team must establish robust mechanisms to measure performance across all business processes within the transformation scope and remain agile in adjusting resource flows or supplier mixes as needed. Achieving the highest efficiency necessitates a multifaceted approach.

To ensure the company is extracting maximum performance from its supply chain, a comprehensive strategy is imperative. Historical data emerges as a pivotal tool, serving as a representation of anomalies and outliers within supply chain processes. Collecting this historical data requires a well-defined and agreed-upon accountability framework, particularly crucial in the context of digital transformation, By analyzing historical data, the company can identify improvement opportunities grounded in factual evidence, leading to targeted enhancements in efficiency.

In the realm of digital supply chain transformation, traditional project planning undergoes a paradigm shift. It transcends the boundaries of the project organisation and start with suppliers, customers, logistics providers, and other stakeholders. This comprehensive planning approach considers and coordinates the potential contributions of each entity, selecting those that will best benefit the project organisation. The initial time and effort invested in this upfront phase yields tangible benefits as projects reach the market more affordably and with heightened customer feedback and acceptance.

Case Study:

Transforming Procurement at ABC Construction:

Background: ABC, a prominent multi-billion-dollar construction company based in India, recognized the need for a more proactive and strategically involved procurement function. The leadership, at the Chief Experience Officer level, aimed to integrate procurement into major decision-making processes. To address historical challenges such as procurement bypass and enhance overall efficiency, ABC initiated a comprehensive digital supply chain transformation.

Assessment and Foundation: The transformation journey began with a thorough sourcing and procurement process assessment. Key business needs were identified, and a roadmap for digital supply chain transformation was established. The company already had core systems in place, including e-sourcing, e-auctions, electronic catalogs, contract management, supplier information management, e-procurement, e-invoicing, and spend analytics.

Digital Levers Identified:

  1. Collaborative Supplier Networks: Utilizing a digital cloud-based platform for enhanced collaboration and efficiency.
  2. Supplier Risk Management: Employing futuristic risk modeling based on internal and external parameters, utilizing predictive analytics.
  3. Robotic Process Automation (RPA): Automating the operational procure-to-pay processes to minimize human touchpoints, enhance purchase order management, and maintain a robust audit trail.
  4. Cognitive Computing and AI: Addressing cost determination challenges by leveraging AI for strategic assessments of raw materials, considering factors such as historical pricing, global market availability, supplier information, and optimal procurement routes.
  5. Predictive/Advanced Analytics via AI: Empowering buyers to make informed decisions for services by providing insights into skillset rates, workforce availability, and current market rates.
  6. Intuitive User-Friendly Visualization Tools: Enhancing user experience through visualization tools for better decision-making.

Strategic Implementation: Upon decision-making in procurement, RPA triggers alerts across departments, including plant, marketing, sales, and finance, making the procurement process more strategic to the organization.

Emerging Solutions and Technologies: The digital innovation team identified futuristic solutions and technologies that could impact sourcing and procurement:

  1. Blockchain: Addressing inefficiencies in paper-based contracts, streamlining contract authoring, workflow, approvals, and documentation processes.
  2. 3D Printing: Exploring innovative possibilities in construction processes.
  3. Sensors/Wearables: Introducing technology for real-time data acquisition in construction sites.
  4. Cyber Tracking: Enhancing security measures in the procurement and supply chain.
  5. Virtual Reality/Spatial Analytics: Exploring applications in project planning and visualization.

By adopting these digital levers and emerging technologies, ABC envisions not only overcoming traditional procurement challenges but also pioneering a transformative journey towards a more efficient, strategic, and technologically advanced supply chain.

Conclusion

The transformative journey emphasises the critical role of continual monitoring, upgrading, and adapting processes. This ensures that the digital supply chain transformation not only aligns with the broader organisational goals but also becomes a powerful means for companies to reconfigure their supply chains in response to dynamic market demands.

In essence, the pursuit of a digitally transformed supply chain is not merely a technological upgrade but a strategic alignment that harmonises innovation and efficiency. As businesses strive to optimize processes, enhance visibility, and foster collaboration, the digital supply chain emerges not just as a destination but as a continuous and adaptive evolution. It is a journey where each step forward contributes to building resilience and efficiency in a landscape marked by relentless change.

About the Author

Albert Wee Kwan Tan, PhD

Dr. Albert Tan joins the AIM faculty as an Associate Professor and Academic Program Director of the Online MBA program.

He has a combined 32 years of industry practice and teaching experience in Australia, Singapore, China, Dubai, Indonesia, Malaysia, and Vietnam. Most recently, he was a visiting professor at NUS-Singapore, MIT SCALE Network, Wollongong-Dubai, Curtin-Australia as well as in Indonesia and Vietnam.

Dr. Tan was conferred a Bachelor in Information Technology in 1996 by the University of Southern Queensland. He also obtained a Master in Business Studies from the University of Ireland in 1998 and a PhD in Operations Management from Nanyang Technological University in 2005. He is also certified Fellow in Production and Inventory Management (CPIM-F) from APICS.

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